Upswing in danger: credit crunch still in sight

For almost a year, more or less contradictory is discussed about the danger of a credit crunch. Employer President has now said that in his view, in the course of the economic recovery, there will be a widespread underfunding of companies with loans.

Credit from the economy

Credit from the economy

In his view, one problem will be the growing demand for credit from the economy. These can hardly be overcome by the banks, which are still struggling with internal difficulties. According to him, the conditions of many companies have already drastically deteriorated in terms of lending.

Hundt therefore campaigned for further state aid. These should become a central topic at the crisis summit scheduled for early December with Chancellor Angela Merkel. This in turn pointed out that the state-owned Intrasavings is already receiving global loans for refinancing to the middle class of extended loans to a greater extent than before. Merkel sees a conversion of the Intrasavings to a house bank, which grants loans to enterprises directly on own account, however, still skeptical.

flow of credit biggest risks

flow of credit biggest risks

The discussion about an imminent or even existing credit crunch meets with different yet undoubted realities: on the one hand, companies are increasingly complaining about the reluctance of many banks to lend. On the other hand, there is a gigantic amount of money circulating in the financial circuit, which has grown massively due to the policy of the central banks and governments and is already causing concern about a destabilization of the financial system.

Financial experts see one of the biggest risks to the flow of credit in the real economy in the still-weak equity capital of many banks. As banks’ credit shortfalls continue to rise in the wake of the recession and its aftermath (credit defaults are a lagging indicator), many banks are forced to reduce their balance sheet risks.

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